Selling your home can be full of difficult decisions, especially if you don’t have the right guidance. This is why we’re providing a breakdown of the two most popular methods of sale: auction vs private treaty.
Private treaties are generally a more common method of selling homes compared to real estate auctions. In fact, 85% of properties nationally are sold by private treaty annually. However, auctions can be a fantastic way to maximise the sale price of your property, especially if it’s unique.
So auction or private treaty? We will look at both methods of sale and their pros and cons to help you decide which one is right for you.
We have some details about when either method could be useful. Of course, these are only recommendations. When deciding how to sell your property, use these guidelines in combination with your agent’s valuable insight.
- What is private treaty?
- When to use private treaty
- The advantages and disadvantages of private treaty
- How do real estate auctions work?
- When to use real estate auctions
- The pros and cons of selling your home via auction
Private Treaty Sales
What is private treaty?
A sale by private treaty is when a seller sets an asking price for their property and buyers make offers around that price. If the seller then accepts the offer, the contracts are exchanged and the property is sold conditionally or unconditionally depending on the terms of the contract.
When to use private treaty
Private treaty is a great method to use when there are plenty of comparable homes for sale in your area and the market price is clear to buyers. If you would like to take your time and be private about the sale, this is the perfect method for you.
The advantages and disadvantages of private treaty
The best features of a private treaty sale is firstly, the lack of time pressure. The hunt for a buyer can go for as little or as long as you’d like until you find the perfect one. There also can be minimal marketing costs involved, as agents can use their networks to find buyers instead of promoting your property to the general public. There’s also a high amount of flexibility in private treaty sales, as you can do everything on your own terms.
Where private treaties don’t have the upper hand is in the cooling-off period. The cooling-off period exists so that buyers can complete their due diligence and ensure that the property is what they had hoped for. Essentially, if the buyers end up not being happy with the property, during the cooling-off period they can rescind their contract.
Another disadvantage is that people usually negotiate down from the asking price when a property is selling using a private treaty, which is the opposite case for an auction. Of course, a good agent will combat this by allowing some wriggle room in the asking price. However, there is a large room for error if your agent doesn’t have up to date market knowledge, which is why we provide our agents with real-time market data. Other setbacks include potentially keeping your house open for longer and more often for private inspections.
Real Estate Auction Sales
How do real estate auctions work?
A residential property auction is quite similar to any regular auction. The auctioneer takes bids and when the hammer falls, the highest bidder wins. This bidder must then sign the contract on that day, with no cooling off period.
When to use a real estate auction
An auction is a fantastic method to employ when the property has few comparable sales, is hard to price, and has high emotional value with buyers. It’s a great choice when wanting to sell the property quickly, as auction campaigns typically last for four to six weeks and have no cooling off period.
The pros and cons of selling your home via auction
The nature of auctions is in the seller’s favour, as the reserve price is set at the lowest price they are willing to accept for their home. Auction pressure can also start bidding wars and lift the price much higher than it might be with a private treaty.
Auctions are also great because they provide the most flexibility throughout the entire campaign. Properties that have chosen an auction campaign can be sold before, on the day of or after auction if it passes in. This method is also incredibly transparent, especially if multiple parties are involved in selling the property.
The setback of an auction is that if the pricing is wrong, it’s likely that the property will pass in, meaning that marketing expenses have to come out of the sellers’ pocket. It’s possible that some buyers will also be deterred because of the public nature of an auction and the high pressure environment. Finally, the nature of the campaign is very public which does not suit every seller, so make sure you know what your boundaries are before you enter into the process.
So auction or private treaty, what’s best for me?
To make a call on what method of sale is best for you, think about your context and get plenty of advice from a reliable source, such as an Avnu agent. But remember, no matter what advice you receive, the decision is ultimately your own.
In summary, think about the following features when deciding how to sell your home:
- How comparable your home is to others in the area
- How emotional the home is for buyers
- Your personal preference (i.e. you want privacy)
Whatever method you choose, it’s of paramount importance that you’re comfortable and getting what you need out of the sale process. Get advice from a real estate agent and find one that understands your criteria. Have a chat to your local Avnu agent to find out what the next steps on your property journey could be.
DISCLAIMER – The information provided is for guidance and informational purposes only and does not replace independent business, legal and financial advice which we strongly recommend. Whilst the information is considered true and correct at the date of publication, changes in circumstances after the time of publication may impact the accuracy of the information provided. LJ Hooker Avnu will not accept responsibility or liability for any reliance on the blog information, including but not limited to, the accuracy, currency or completeness of any information or links.